Factual Pursuit of Truth for Progress
A decline in revenue allocation to federal, state and local governments has been recorded from a peak of N970.57bn in July 2021 to N680.783bn in May 2022, representing a 30 per cent reduction over the period.
The decrease in allocation to these levels of government reveals the fiscal challenges facing various levels of government in Africa’s biggest economy.
“It is obvious that with this outlook, state governments will not be able to execute capital projects, pay salaries and meet other needs. This is time for states to look inwards,” said Professor of Economics at Covenant University, Jonathan Aremu, in a telephone interview last night.
Nigeria earns its biggest revenue from crude oil, but it has paid N2.1tn in the first six months of the year and could pay another N4tn by the end of the year, according to the International Monetary Fund estimates.
The opaque and fraudulent subsidy regime has made it nearly impossible for the Nigerian National Petroleum Corporation to make remittances to the government consistently.
The Federal Government has raised its budgetary allocation of N443 billion for gasoline subsidy to N4 trillion and has received approval from the National Assembly.
The situation is worsened by declining oil production and theft. Oil production fell to 1.2 million barrels per day in April 2022 from 1.238 million barrels in March, according to OPEC Monthly Oil Market Report. This is far from the oil benchmark of 1.88 million barrels per day in the 2022 budget.
Company Income Tax in Nigeria fell from N472.52bn obtained in the third quarter of 2021 to N347.81 billion in the last quarter of 2021, indicating a 26 per cent decrease over the period, according to the National Bureau of Statistics,
“A lot of states did not think the revenue would decline so fast. The revenues would go down if their sources are declining. It costs more now to construct those projects, so states need to look inwardly. They also need to plug leakages because this is not the time to waste money at all,” Aremu said.
A Lagos-based senior financial analyst and Director at Bishop and Rooks, Mr Wole Oluyemi, said it was obvious that states might not continue to fund big projects and could default on many fronts.
“There is a limitation on the number of projects they can do. Those who have a high-risk appetite and still want to continue those projects will start owing salaries because something must give way. Projects will be abandoned and some of them will start borrowing in the form of bonds for projects so that they can continue with their plans,” Oleyemi said.